Yugoria's European Upgrade

15.09.2010 — Analysis

As Vera Dyudina, the deputy governor of Yugra and chairman of Yugoria's board of directors, notes, they have repeatedly requested that the company's directors to raise the share capital. The autonomous area's non-core assets should be privatized in due time and at a fair price. Some "merchants" did make an offer to the former governor of Yugra, Aleksandr Filipenko, but he only laughed - it wasn't enough, our golden goose is worth more than that. According to the results from 2009, among Russian insurers, the Yugoria insurance group was in 14th place in terms of assets and in 16th place in terms of total premiums collected. During the economic crisis in 2009, the company had a net profit of almost 198 million rubles.

Vladimir Volkov, a member of Yugoria's board of directors who has directed it for many years, notes not without pride that a 2009 audit by Deloitte valued the company at 7 billion rubles and that its value has risen since then. This new value will be announced at the end of September and will increase excitement about a possible issuance of additional shares of Yugoria, which the European Bank for Reconstruction and Development will be invited to purchase.

Vera Dyudin made the announcement about the negotiations with EBRD, which signifies the government's readiness (and the readiness of Governor Natalya Komarova) to privatize it on a "European" level. Experts questioned by RusBusinessNews note that this kind of leaked information should have been cleared with the bank first, since, like most financial institutions, the bank carefully guards its business plans. Ms. Dyudin said nothing about the terms and conditions of the issuance, but apparently the sale will be soon.

What is the European Bank for Reconstruction and Development being invited to buy? In fact, it is a unique selling proposition. Yugoria has grown from a regional firm to one of the top 20 insurance companies in Russia. It held 1.4% of the domestic insurance market in 2009.

Yugoria's general director, Aleksei Semenikhin, told the press that in the first half of 2010, 5% more premiums were collected in comparison to the same period last year. Out of the 3.318 billion rubles, 79% was collected from 54 regions in Russia where Yugoria is represented, and 20% of the total came from the Yugra region. Payouts, which amounted to 2.036 billion rubles between January and June, were disbursed along similar geographic lines.

The fact that it is state-owned is still important for Yugoria's image. Vladimir Volkov emphasizes that it was because of this government support that Yugoria was able to extend its reach beyond the borders of its autonomous area. It is not just the size of the company's assets, but the security of state backing in the region that is the deciding factor for potential customers. "Our advertising campaign has focused on our close association with the government," admits Aleksei Semenikhin. As a result of regional expansion, Yugoria is one of the top five insurance companies in the Tyumen, Kirov, and Orlov regions. And in the fairly saturated insurance markets in the Sverdlovsk region and St. Petersburg, Yugoria is still in the top ten.

Yugoria's privatization was preceded by the denationalization of the Khanty-Mansiysk Bank, which two years ago was 100% owned by the Yugra government. After issuing additional shares, the region retained ownership of 44% of the bank and its capitalization increased by more than 10 billion rubles. This is a good benchmark for the local authorities. Yugoria, whose total share capital now amounts to 2.073 billion rubles, is unlikely to match that impressive record as it begins to untie itself from the government's apron strings. But it is possible that after the EBRD, an insurance company might be found in Europe with an extensive regional network and financial indicators similar to Yugoria's, which would arouse a healthy appetite.

There is no doubt that a successful marriage between EBRD and Yugoria would be an asset for Governor Natalya Komarova, who needs to demonstrate some strategic thinking and some projects on a European scale. RusBusinessNews will monitor the situation as it unfolds.